In the past, there have been numerous price corrections for cryptocurrencies. The market has demonstrated the bears’ dominance over several cycles. But here is everything you need to know about the ongoing crypto winter.
Since the start of this year, the price of cryptocurrencies has been falling rapidly in a negative trend, reports Financial Express. The current situation can be likened to the time from 2018 to 2020, which is known in the market as the “crypto winter,” even if all corrections differ and are brought on by different variables.
What is crypto winter?
In the past, there have been numerous price corrections for cryptocurrencies. The market has demonstrated the bears’ dominance over several cycles. A bear market often refers to a period when prices drop by about 30% from record highs. Since the beginning of this year, most cryptocurrencies have decreased by more than that. This lacklustre market is referred to as a “crypto winter,” which represents the unfavorable tone among digital currencies. The HBO series Game of Thrones is credited with popularizing the term “crypto winter.” The time frame foresees problems falling over the cryptocurrency industry.
Hodlers may find it difficult given the market’s high level of volatility. But this is not the first time the market has seen a period of correction like this. As was previously said, from 2018 and 2020, Bitcoin’s market value decreased by about half, but it recovered in November 2021 and hit an all-time high. Crypto winter is only an extended version of a traditional bear market.
But as the great poet P.B. Shelley put it, “If winter comes, can spring be far behind?”
When does the crypto winter start?
Numerous diverse variables typically contribute to prolonged crypto winters. Several macroeconomic factors, including the Federal Reserve raising interest rates, have already had a significant impact on the cryptocurrency market in 2022.
Additionally, the market fell into a downward spiral from which it has yet not recovered when the TerraUSD stablecoin was de-pegged in mid-May. While BTC has been in a consolidation phase since the beginning of April, it started to decline in mid-May as a result of the de-pegging of the TerraUSD stablecoin. It struck its lowest point in June during the Celsius controversy, dropping to the weakest point since December 2020 at US$18,000. The market has been interpreting the downward trend in the price of BTC as a sign that the crypto winter has arrived.
What is the advantage of this period?
All speculative enterprises and cryptocurrencies appear to be traveling to the moon during a bull market. The best times for price discovery and correction generally occur during downturn markets. The poor projects are filtered out by crypto winters, which encourage the most creative ones to develop and validate their ideas. After the winter’s regeneration phase, the cryptos that can withstand this particular time period can emerge beyond their placements.
What should investors do?
For investors seeking for a chance to pick up more cryptocurrencies at rock-bottom rates, the crypto winter is a fantastic time. But it is important to conduct thorough research and analysis before making any definitive judgments about investing. During a bad market, everything appears to be on sale. It may be alluring to put money into random coins in the hopes of generating exponential returns. But that is a fairly inexperienced choice.
Is crypto winter the same as a bear market?
A market that is underperforming is referred to as a bear market; it could be one for stocks, cryptocurrencies, or even equities. However, users often use the term “crypto winter” to describe a period when cryptocurrency prices are lower than normal. The majority of cryptos are impacted at this time. Therefore, during crypto winters, investors need to prepare for a market-wide decline.
How to survive in the crypto market during this period?
One thing to keep in mind during this extended period of price volatility is that dips are a typical part of investing. You can navigate these situations with the help of the following advice.
- Avoid making investments with money you can not afford to lose.
- Start formulating a strategy for surviving the bear market, such as Dollar Cost Averaging or DCA.
- Maintaining strength and avoiding panic selling are crucial.
- Typically, bear markets move quickly and furiously.
Crypto winters can make you feel depressed, but keep in mind that bull markets also come after bear markets. History demonstrates that prices have always increased in the stock market. Cryptocurrencies can be extremely volatile, yet this industry has always recovered. and made a tremendous comeback. For this reason, research is crucial before making decisions on investments. Following SIP or DCA can help you as a long-term investor get better risk-adjusted returns during these times.